Snap Inc. disappoints investors reporting sluggish user growth

Snap Inc., the parent company of image and video sharing app Snapchat, recently reported its quarterly financial earnings for the first time since going, and the results weren’t good. Snapchat’s user growth has stalled and the company’s revenue was below Wall Street expectations for the quarter.

The company went public with an IPO in March, and spent almost $2 billion in stock-based compensation, which in large part contributed to its net loss. Snap Inc.’s revenue was reported at $150 million, which fell $8 million short of Wall Street’s $158 million expectations. Following Snap’s earnings announcement, its stocks fell 23 percent to $17.67, bringing them dangerously close to its IPO price of $17.

Snapchat currently has 166 million daily active users, which is an increase of 36 percent from the 122 million in the same period last year. This pales in comparison to Facebook’s approximately 1.94 billion monthly active users for March 2017. Snapchat’s growth appears to have been stemmed by Facebook copying its features; for example, Instragram’s Stories feature mimics Snapchat’s disappearing video messaging concept.

It remains unclear how Snap Inc. will measure up to its heavy competition, but its foray into hardware such as Snap’s Spectacles eyewear product. Snap Inc. CEO Evan Spiegal attempted to ease concern regarding the company’s earnings results by explaining how Snapchat won’t succeed because of massive growth numbers, like its competitors. Instead, it will succeed because it offers more quality as a product.

Spiegal dismissed the practices of typical consumer apps, which he called “growth hacks” such as excessive push notifications or prompts for users to connect with everyone in their address list. Those sorts of techniques, he said, are not “very sustainable over the long term.” He said the company is more focused on making product improvements.

“The way that we try to help people understand how we think about daily active user growth is really through the lens of creativity and creation,” he said, before mentioning the app’s lenses product that lets users change their appearance for selfies. “People enjoy looking like a puppy and things like that.”